India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Cadila’s 3QFY11 numbers were broadly in line with our expectations with
domestic growth at a reasonable 16.6% YoY for the quarter even as the
US business continued to grow strongly (up 33% YoY). Ramp down of
Nycomed joint venture from immediate quarter would soften earnings
growth slightly for 4QFY11. We expect Cadila’s net profits to grow at
24% cagr over FY10-13CL and see upsides from the US generics business
as well as Hospira JV. The stock remains reasonable at 19x FY12. BUY.
Healthy domestic formulations growth
Domestic growth maintained its health growth pace at 16.6% YoY continuing
from the recent quarters. The company introduced nine products during the
quarter. Zydus Wellness (consumer segment) continues to do well with 21%
YoY growth, though slower than recent quarters.
US market continues to lead exports growth
Export formulations grew 19% YoY in 3QFY11 with US business growth at
33.1% YoY. Cadila has maintained its market share in some of its major
products including Flomax generic (30%+ share). Growth in EU looked weak
due to a high base as Cadila began supplies of clopidogrel in same quarter
last year (initial supplies are usually bunched up). Growth in Brazil was
encouraging though South Africa got impacted due to delay in approvals.
Formulation supplies to Abbott are likely to begin in FY12 though a reasonable
contribution can be expected in FY13/14.
Major benefit from Hospira JV to come in FY12
Business from Hospira JV grew 97% to Rs366m (provided Rs209m in profits).
With potential launch of Taxotere (US$1.2bn+ in size) generic by Hospira in
the US, Cadila could rake in strong profit growth over coming quarters.
Hospira and Sun Pharma are potential early entrants in Taxotere. Nycomed
joint venture is expected to ramp down significantly from the coming quarter
as volumes and prices in Pantoprazole go down as market gets genericized.
With expanded joint venture, additional API supplies are expected to start in
mid FY12 and provide some cushion to earnings.
Strong FY12, reasonable valuations
We expect Cadila’s net profits to grow at 24% cagr over FY10-13CL with
further upsides from Prevacid and Hospira JV (Taxotere). Considering that the
company has a large proportion of domestic business (c.55%), currency
appreciation is a lesser risk in case of Cadila than some of the other pharma
companies. The stock remains attractive at c. 19x FY12. Buy.
No comments:
Post a Comment